The IFS has speculated upon an Osborne Plan B. In the old days these were called U-Turns, made famous by Margaret Thatcher’s dismissal of the idea at a Tory conference, since when no economist or politician has dared go near the term. The new buzword is Plan B. Like the old U-Turn Plan B can be a fast track to Plan IMF.
This is because such plans all have the same ingredient; more borrowing. For the second most borrowed nation on earth, if you take everything into account, this is not an option. The option ahead for the Treasury is actually a requirement. It is the growth element of their current plan. This may cause a temporary surge in the deficit if tax cuts are a feature, but the stimulus of these is powerful and immediate, if they concentrate upon the least well off. In austerity, those on low incomes cannot spend, because they have no cash left. Give more and it will at once be used.
It is imperative that the cuts carry on. There is no future for an obese state, gorging on the labour of the private sector. Such an economic plan has failed in every economy in which it has been used. There may be a case for some speeding up of capital projects and, as previously suggested, the restoration of some part of the school rebuilding programme. Overall the appetite of the state for revenue has to be shrunk and this requires surgery which cannot be delayed.
Finally a question should be asked of the efficacy of ring fencing. This election pledge, like the Lib Dem tuition fee debacle, should not, in the fiscal climate of May 2010, have been made. I doubt it won many votes. Anyway it did not win enough. It may have to be dumped. Overall, however, the economy has to change direction to get out of trouble and to do that, like a speeding bus on a bend, it has to slow down. Otherwise it will crash. December’s growth figures are no cause to panic. Indeed quite the reverse.